The coronavirus pandemic has resulted in a massive shutdown of industries and supply chain disruptions owing to the closure of the major Chinese ports. As a result, the global economies dependent on China are grappled by rare “twin supply-demand shock”, and Africa was not an exception. The continent felt the jolts quite early when its demand for commodities and raw materials in China saw a grave decline.
The repercussions didn’t end there, Africa’s access to manufactured goods and components from the region also came to a standstill. This caused further mayhem in the continent that is already contending with widespread economic and geopolitical instability.
One of the key countries in the region, South Africa is also experiencing the devastating effects of the COVID-19. All the non-essential retail had come to a halt when the South African government imposed a 21-day lockdown in an effort to control the spread of the virus. However, pharmacies, stores selling non-alcoholic drinks, and food items are allowed to operate.
South African Industries Directly Impacted by Coronavirus
Retail, leisure, travel, and select discretionary consumption are one of those industries that will be directly affected by COVID-19. It is anticipated the low consumption in the short run will lead to weak demand for global consumer products.
For instance, the luxury brands are likely to take a severe hit because of declining demands and priorities shift. According to Bain & Company and Altagamma, Chinese consumers have a significant stake (about 35%) in global luxury goods sales during the past year. And this year’s travel restrictions will keep them from buying global luxury goods.
The Mobility Trends in South Africa
Talking about the movement, here is what Google and Apple’s mobility trend reports show:
Apple is compiling the following data from January 13, 2020, by counting the number of daily requests made to Apple Maps for directions.
After transit stations, retail and recreation sectors have seen the worst decline in traffic. Places like shopping centers, theme parks, restaurants, cafes, movie theatres, museums, and libraries have witnessed a staggering 75% decrease in traffic.
Unfortunately, South African consumers were already under pressure before the coronavirus hit the country due to dreary economic growth and poor wage growth. With the implementation of the lockdown, Fitch Solutions suggests that household spending in the country will further slide down by 1.4% y-o-y in 2020.
The Brighter Side of Things
The initial assessment of Fitch Solutions suggests that demand for essential retail products will boost during the lockdown. Thanks to reprioritizing of household spending, buyers are keen to purchase priority items like food, health products, and non-alcoholic drinks.
The South African government has permitted the sale of the below mentioned essential consumer goods:
However, non-essential retail, particularly fashion retail, will bear the brunt of the shutdown as they can resume their operations until the lockdown isn’t lifted. The labor-intensive segments of the apparel supply chain will also remain inactive, which can lead to a shortage of retail stocks and job losses.
But strategies to sell products online may give retailers some sigh of relief.